After a 4-day losing streak, the major stock indexes ended yesterday’s trading session higher on Fed signals regarding its bond tapering and interest rates. Although Fed officials made no conclusive statements, short-term benchmark interest rates remain anchored near zero, which should bode well for the tech sector.
Furthermore, as companies across various industries invest substantially in tech upgrades to keep up with growing digitization, the tech sector should keep thriving. According to Forrester, U.S. tech spending will expand 7.4% in 2021 and 6.7% in 2022.
So, we believe any further market dips would be an attractive opportunity to place bets on fundamentally sound tech stocks Apple Inc. (AAPL), Applied Materials Inc. (AMAT), Micron Technology Inc. (MU), and Vontier Corporation (VNT).
Apple Inc. (AAPL)
APPL is one of the largest manufacturers and suppliers of consumer electronics. Its tech-market dominance is unparalleled. Moreover, the company’s innovative edge and brand value have allowed it to enjoy strong growth over the years. APPL is based in Cupertino, Calif.
This month, AAPL unveiled its Apple Watch Series 7, which includes a re-engineered Always-On Retina display with considerably more screen surface and thinner boundaries. According to the company, it is the biggest and most advanced display ever.
Also this month, AAPL introduced iPhone 13 and iPhone 13 mini. The company stated that both models include significant technological advancements, including the most sophisticated dual-camera system on an iPhone, a powerful processor, and an impressive improvement in battery life.
AAPL’s net sales increased 36.5% year-over-year to $81.43 billion in the third quarter, ended July 26, 2021. Its operating income grew 84.3% from its year-ago value to $24.13 billion, while its net income improved 93.2% year-over-year to $21.74 billion over this period. The company’s EPS has increased 100% from the year-ago value to $1.30.
A $5.59 consensus EPS estimate for the current year represents a 70.4% improvement year-over-year. Furthermore, AAPL has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Analysts expect AAPL’s revenue to increase 33.5% year-over-year to $366.39 billion in fiscal 2021. The stock has gained 30.5% in price over the past year and 18.2% over the past six months.
AAPL’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
AAPL is rated an A grade for Sentiment, and a B for Quality. Within the B-rated Technology-Hardware industry, it is ranked #23 of 46 stocks.
To see additional POWR Ratings for Growth, Value, Stability, and Momentum for AAPL, click here.
Applied Materials Inc. (AMAT)
AMAT provides manufacturing equipment, services, and software to the semiconductor, display, and related industries. The Santa Clara, Calif.-based company operates through three segments: Semiconductor Systems; Applied Global Services; and Display and Adjacent Markets.
This month, AMAT introduced innovative technologies and capabilities aimed at helping customers accelerate their heterogeneous chip design and integration technology roadmaps. In addition, the company aims to leverage its advanced packaging and large-area substrates leading technologies with industry partnerships to accelerate the availability of solutions that enhance power, performance, area, cost, and time to market.
Last month, AMAT introduced novel solutions to assist the world’s leading silicon carbide (SiC) chipmakers in transitioning from 150mm to 200mm wafer manufacturing, which nearly doubles die output per wafer, to meet the world’s rising demand for premium electric vehicle powertrains.
For its fiscal third quarter, ended August 1, 2021, AMAT’s net sales increased 41% year-over-year to $6.20 billion. Its operating income grew 19.3% year-over-year to $99 million over this period. The company’s net income surged 104% from its year-ago value to $1.72 billion, while its EPS increased 105% from the prior-year quarter to $1.87.
Analysts expect AMAT’s revenue to increase 35.5% year-over-year to $23.31 billion in its fiscal year 2021. In addition, the company’s EPS is expected to grow 64.3% in the current year. Over the past year, the stock has gained 138.6%.
AMAT’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. AMAT also has a B grade for Momentum and Quality. Within the B-rated Semiconductor & Wireless chip industry, it is ranked #30 of 97 stocks.
In total, we rate AMAT on eight distinct levels. Click here to see additional POWR Ratings for Growth, Value, Sentiment, and Stability for AMAT.
Micron Technology Inc. (MU)
Boise, Idaho-based MU designs, manufactures, and distributes memory and storage devices internationally. Compute and Networking Business; Mobile Business; Storage Business; and Embedded Business are the company’s four operational segments. It provides memory and storage technologies such as DRAM, NAND, NOR, and 3D XPoint memory under the Micron and Crucial brands as well as through private labels.
Last month, MU announced the availability of Crucial P5 Plus PCIe SSDs as part of an extension of its award-winning NVMe solid-state drive (SSD) portfolio to provide users with high-performance internal Gen4 storage choices. Crucial P5 Plus SSDs provide lower power, greater performance, and denser storage solutions by using Micron’s first-to-market commercial shipments of 176-layer NAND.
During the third quarter, ended June 3, 2021, MU’s revenue increased 36.5% year-over-year to $7.42 billion. Its operating income surged 102.6% from its year-ago value to $1.80 billion over this period. The company’s net income grew 116.1% from the prior-year quarter to $1.74 billion, while its EPS increased 186.8% year-over-year to $1.52.
A $5.98 consensus EPS estimate for the current year indicates a 111.3% improvement year-over-year. Analysts expect MU’s revenue to increase 29% year-over-year to $27.65 billion in its fiscal year 2021. The stock has gained 48.8% in price over the past year and 5.4% over the past month.
MU’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Value and Momentum. In the Semiconductor & Wireless chip industry, it is ranked #26 of 97 stocks.
Beyond what we’ve stated above, we have also given MU grades for Growth, Stability, Sentiment, and Quality. Get all the MU ratings here.
Vontier Corporation (VNT)
VNT is engaged in the research and development, production, sale, and distribution of key technical equipment, components, software, and services for the manufacturing, repair, and maintenance of mobility infrastructure. The Raleigh, N.C.-based concern offers a wide range of solutions, including environmental sensors, fueling equipment, field payment hardware, remote management, and workflow software.
This month, VNT completed its acquisition of DRB Systems, LLC, a leading provider of car wash point of sale, workflow software, and control solutions. With this acquisition, the company aims to diversify its portfolio, improve its profitable growth profile, and accelerate its retail solutions approach.
VNT’s sales increased 35.8% year-over-year to $724.6 billion in the second quarter, ended July 2, 2021. Its operating profit grew 34.5% from its year-ago value to $121 million. The company’s net income has surged 20.3% from the prior-year quarter to $82.3 million, while its EPS increased 17.1% year-over-year to $0.48.
The company’s EPS is expected to grow 13.4% year-over-year to $2.8 in the current year. In addition, analysts expect VNT’s revenue to increase 9.5% year-over-year to $2.96 billion in its fiscal 2021. VNT’s stock has gained 4.1% in price over the past six months.
It is no surprise that VNT has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Value, Sentiment, and Quality. In the B-rated Industrial – Equipment industry, it is ranked #31 of 92 stocks.
In addition to the POWR Ratings grades I have just highlighted, you can see the VNT ratings for Stability, Growth, and Momentum.
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AAPL shares were trading at $146.68 per share on Thursday morning, up $0.83 (+0.57%). Year-to-date, AAPL has gained 11.06%, versus a 19.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...
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